Compared with other emerging regions, Asia is relatively well placed to withstand sluggish global growth. For one thing, policymakers have the ability and willingness to significantly loosen monetary and fiscal policy. Although we expect most countries to grow by only slightly below trend, there is a considerable risk that global demand rapidly deteriorates and causes a much sharper slowdown in Asia. Currencies and equity markets will probably struggle in the remainder of this year and in 2013, before picking up in 2014. Government bond yields are likely to stay at historically-low levels.
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